U.S. Retail Sales fell in July 2021

By guest author Amara Omeokwe from the Wall Street Journal

Caption and graphic courtesy by the Wall Street Journal

Retail sales fell 1.1% in July from the month before, with spending down broadly across categories as concerns about the Delta variant grew.

Retail sales rose briskly in June, as shoppers directed spending toward services, such as dining out and traveling, and away from goods. That shift occurred as more Americans became vaccinated and state and local governments eliminated many Covid-19-related restrictions, some of which have now been reimposed with the recent rise in coronavirus cases.

Retailers and other U.S. businesses are facing uncertainty caused by the Delta variant, as the highly transmissible strain causes setbacks for some companies and data suggest some pullback in spending on items such as air travel and cruises. A University of Michigan survey showed a sharp drop in consumer sentiment during early August. Richard Curtin, the survey’s chief economist, said the decline was due “mainly from dashed hopes that the pandemic would soon end.”

Peter Elitzer, chief executive at discount retailer Label Shopper, said he had noticed more customers donning masks recently while shopping, even before the Centres for Disease Control and Prevention reversed earlier guidance and recommended that vaccinated Americans resume wearing masks indoors where Covid-19 rates of infection are high.

Label Shopper has more than 60 stores located mostly in the Northeast and Midwest, and Mr. Elitzer said in the past two weeks he has noticed a bit of softening in sales at some locations, which he attributed to some customers being anxious about the Delta variant.

Still, he said demand at stores broadly has been holding up well and that the back-to-school shopping season had gotten off to a solid start resembling pre-pandemic patterns.

“The amount of anxiety that’s occurred since probably February of 2020, this is mild relative to that,” he said of concerns over the Delta variant.

Gus Faucher, chief economist at PNC Financial Services Group, said state and local governments, especially in parts of the South where Covid-19 case counts have risen most sharply, are hesitant to reimpose strict restrictions, which should allow consumers to continue to spend freely and visit stores. Mr. Faucher said households’ savings stockpiles, a pickup in jobs added to the economy and low interest rates should continue to encourage Americans to spend.

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A Mastercard tracker of online and in-store spending shows that retail sales, excluding autos and gas, were up roughly 11 % in July compared with the same month in 2020. Sales of apparel and jewellery each rose about 80 % over the same period, while revenue at restaurants was up 61%, according to the tracker.

Such trends represent “passion-led spending” as people resume their pre-pandemic activities, said Bricklin Dwyer, Mastercard’s chief economist.

“We’ve seen people ready to move on with their lives and ready to continue to spend and get to whatever the new status quo looks like,” Mr. Dwyer said. People are spending on items they “really feel good about because you’ve had a lot of time to think on what you want to do when the economy reopens,” he added.

Rebekah Mandeville, owner of Mandeville Beer Garden in Sarasota, Fla., said sales in July were up 109% from July 2020 and 45 % from July 2019.

Ms. Mandeville said demand has steadily ticked higher this year as vaccines circulated and people felt more comfortable going out. She said the beer garden, which has 34 taps and serves burgers, bratwurst and salads, has also benefited from having a large outdoor area where it can seat customers.

She said one of her biggest recent challenges has been finding available workers, a concern shared by many employers across the country. She estimates she lost three to four weeks’ worth of daytime revenue earlier this summer because she didn’t have enough staff to be open during the middle of the afternoon.

As for the Delta variant, Ms. Mandeville said she isn’t particularly worried. She added that she and many people she knows are vaccinated.

“I don’t feel the anxiety that one might be expected to feel when they read and hear about everything happening in Florida,” she said, referring to the rise in cases in that state. “We have to carry on with life. That, I think, is the bottom line. I don’t think anyone is served by just trying to hide from this.”